1. When dividends are paid, the amount paid

a is an operating cash outflow.

b decreases net income.

c reduces assets and increases expenses.

d is always a predetermined percentage of net income.

e None of the above are true.

2. On November 1, 2024, Perrier Company paid $15,000 for 15 months of consulting services. Perrier's annual financial statements as of December 31, 2025 would show

a $12,000 consulting expense; $1,000 prepaid consulting fees

b $14,000 consulting expense; $1,000 prepaid consulting fees

c $12,000 consulting expense; $3,000 prepaid consulting fees

d $15,000 consulting expense; $0 prepaid consulting fees

e $14,000 consulting expense; $0 prepaid consulting fees

3. At the end of 2025, Factory Corporation owed $1,200 for utilities used in December, which it will pay in January. If the bookkeeper does not make an entry for this at December 31, 2025,

a the financial statements will be correctly stated.

b retained earnings is overstated and total assets are understated.

c both total assets and total liabilities are overstated.

d both liabilities and net income are understated.

e liabilities are understated and retained earnings is overstated.

4. Edita, Inc. started business in 2025 and, in that year, had total sales of $82,000. At December 31, 2025, Edita had a balance in accounts receivable of $4,000 and a balance in unearned revenue of $1,000. How much cash did Edita received during the year?

a $85,000

b $79,000

c $78,000

d $83,000

e None of the above